On the heels of this report, Corinthian Colleges announced that the Department of Education has imposed a 21-day hold on federal financial aid payments. Why? Because Corinthian failed to provide information about its possible falsification of graduate job placement data. The Department’s concerns echo those of two stateattorneys general, who recently filed actions alleging that Corinthian inflated job placement rates, among a number of other alleged deceptive practices.

Now Corinthian is in danger of closing some or all of its campuses. This could impact over 72,000 students nationwide. Fortunately, students whose campuses close should qualify for the cancellation of their federal student loans. This, however, is not complete relief. Low-income students will not be entitled to renewed eligibility for Pell grants. Veteran students will not be entitled to renewed eligibility for G.I. Bill funds. Although some students may apply to state student protection funds for the pay-off of their private loans, many live in states that do not maintain such funds. Nor do the loan cancellations account for the lost time and effort so many students put into their Corinthian studies. For the majority of these students, the credits earned will be non-transferable and worthless.

But these aren’t the only people harmed. Taxpayers may ultimately lose millions of dollars in cancelled student loans. Students who enrolled because they believed that a Corinthian credential would lead to high paying employment, who graduated, and who never found employment in the occupation for which they trained will also be harmed. These students will not qualify for any type of student loan cancellation.

In light of the serious allegations leveled at Corinthian, the Department’s decision to impose the 21-day hold should be commended. But this decision comes far too late. Had there been active regulators on the beat, the extraordinary losses now facing taxpayers and students might have been avoided. The Department knew that Corinthian was having financial problems back in November 2012 when Corinthian’s financial responsibility score fell below the required minimum. Yet the Department waited over a year and a half before taking any action. State oversight agencies should have been aware of Corinthian’s low financial responsibility score, as well as the two state AG actions and eight pending state AG and federal agency investigations, one of which was initiated as early as 2011. (See Appendix A of NCLC’s report). Yet it does not appear that a single state oversight agency took steps to audit Corinthian’s placement rates, to investigate Corinthian’s financial health, to investigate other potential abuses, or to take some action to protect students and taxpayers. The result? Corinthian was allowed to enroll thousands of students unimpeded, despite so many warning signs. And now it is likely the students and taxpayers will have to pay.

This is a wake-up call. State regulators and the Department must start actively monitoring for-profit schools and taking action to protect students and taxpayers as soon as there is any evidence that a for-profit school is violating the law or failing minimum standards.

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